Section 245 — Corporation Tax Act 2010: Repayment of loan capital during 5 year period

Repayment of loan capital during 5 year period 245 1 If the investment consists of a loan and—

a the average capital balance of the loan for the third, fourth or final year of the 5 year period is less than the permitted balance for the year in question, and b the difference between those balances is not an amount of insignificant value, any CITR attributable to the investment in respect of any accounting period must be withdrawn.

2 For the purposes of this section— “the average capital balance” of the loan for a period is the mean of the daily balances of capital outstanding during that period, ignoring any non-standard repayments of the loan made in that period or at any earlier time, and “the permitted balance” of the loan is— for the third year of the 5 year period, 75% of the average capital balance for the period of 6 months beginning 18 months after the investment date, for the fourth year of that period, 50% of that balance, and for the final year of that period, 25% of that balance.

3 For the purposes of subsection (2) a repayment of the loan is a non-standard repayment if subsection (4) or (5) applies.

4 This subsection applies if the repayment is made at the choice or discretion of the CDFI, and not as a direct or indirect consequence of any obligation provided for under the terms of the loan agreement.

5 This subsection applies if the repayment is made as a result of the failure of the CDFI to meet any obligation of the loan agreement which—

a is imposed merely because of the commercial risks to which the investor is exposed as lender under that agreement, and b is no more likely to be breached than any obligation that might reasonably have been agreed in respect of the loan in the absence of this Part.

6 For the purposes of this section “ an amount of insignificant value ” means an amount which—

a is not more than £1,000, or b if it is more than £1,000, is insignificant in relation to the average capital balance of the loan for the year of the 5 year period in question.